Special Session Summary Alternative Promotional Strategies: Salience and Inference

ABSTRACT - Behavioral research examining sales promotion has been heavily focused on the effects that price discounts have on consumer perceptions and purchase behavior. This session examines the advantages of using alternative promotional strategies to standard price discounts. These alternatives include promotions that increase the perceptual salience of products and thereby influence purchase and consumption behavior, as well as the use of every-day-low-prices and free gift promotions. Particular attention is paid to the conditions under which these alternative strategies are likely to be effective, as well as to identifying the psychological processes that underlie their effects.

Citation:

Peter R. Darke (2001) ,"Special Session Summary Alternative Promotional Strategies: Salience and Inference", in E - European Advances in Consumer Research Volume 5, eds. Andrea Groeppel-Klien and Frank-Rudolf Esch, Provo, UT : Association for Consumer Research, Pages: 141-144.

European Advances in Consumer Research Volume 5, 2001      Pages 141-144

SPECIAL SESSION SUMMARY

ALTERNATIVE PROMOTIONAL STRATEGIES: SALIENCE AND INFERENCE

Peter R. Darke, University of British Columbia, Canada

ABSTRACT -

Behavioral research examining sales promotion has been heavily focused on the effects that price discounts have on consumer perceptions and purchase behavior. This session examines the advantages of using alternative promotional strategies to standard price discounts. These alternatives include promotions that increase the perceptual salience of products and thereby influence purchase and consumption behavior, as well as the use of every-day-low-prices and free gift promotions. Particular attention is paid to the conditions under which these alternative strategies are likely to be effective, as well as to identifying the psychological processes that underlie their effects.

Discounts are by far the most commonly used form of sales promotion. Indeed, their use has steadily increased in recent years. For instance, the number of price reductions offered in department stores grew from 6% of total sales to 19% between 1963 and 1986, while the number of coupons distributed by manufacturers tripled between 1976 and 1988, reaching, in 1995, the astonishing number of 3000 per household (Blattberg and Neslin 1991, p.15). However, despite their growth in popularity, the use of discounts as a promotional strategy has received a good deal of criticism. For instance, it can be hard to predict sales volume and maintain inventory when using discounts, advertising costs are high, and consumers may be becoming increasingly wary of the initial price claims suggested by discounted price claims. In fact, many studies claim that the majority of price promotion programs are not profitable (Abraham and Lodish 1990).

The existing research on sales promotion has also focused almost exclusively on the effects price discounts have on perceptions of price, quality, value, and purchase intentions/behavior. Relatively little research has examined alternative pricing and promotion strategies, such as the offer of a free gift, every-day-low-prices (EDLPs), or nonmonetary promotions used at the point of purchase. Further, beyond its effects on purchase behavior, relatively little is known about the potential influence sales promotion can have on behavior outside the initial purchase contextCespecially its influence on consumption behavior. The papers included in this session focus on these somewhat neglected aspects of sales promotion, in order to better understand the full range of effects that sales promotion can have on consumer behavior. Particular attention is paid to the advantages and disadvantages of using alternative promotional strategies, and in determining the conditions under which these alternatives might be preferred to standard discounts. Overall, this special topics session provides new insights into alternative promotional strategies that have certain advantages over more commonly used strategies, and it provides marketers with clear guidelines as to when these strategies are most likely to be effective.

In a series of studies, Chandon examines the salience effects that non-monetary promotions can have on consumer attention, purchase and consumption. He shows that attention-grabbing promotions, such as shelf displays, can increase purchase intention without necessitating a price reduction, simply because consumers often buy the first thing that they notice on the store shelf. Interestingly, the attentional effects of promotions were more likely to occur for non-branded products than for branded products. Additional studies go beyond the initial purchase situation to show that an increase in visual salience in the house pantry caused by promotional packs can accelerate consumption behavior. The implication of this study is that marketers can improve the profitability of their promotions by increasing their attention-grabbing impact at the point of purchase and at the point of consumption.

In the second presentation, Darke and Chung examine the negative effects that different forms of promotional activity can have on product image. They show that discounted items are highly vulnerable to negative quality inferences which tend to undermine the perceived value of the offer in the consumers eyes. Although many marketing practitioners have suggested EDLP claims are less vulnerable to such negative quality inferences, the data presented by Darke and Chung suggest this is not the case. EDLP claims were just as vulnerable to negative quality inferences as discounts. Importantly, Darke and Chung show that free gift offers were better able to communicate value to consumers, because they led individuals to use the higher original price as the basis of inferring the quality of the product. Finally, Darke and Chung show that the initial effects of advertising a sales promotion on perceptions of quality are further exaggerated following actual product trial. This last finding suggests that negative quality inferences that are initially made after seeing an ad for a sales promotion can "snowball" as consumers gain further experience with the promoted item. By drawing on the extensive price-perceived quality literature, Darke and Chung are able to provide clear advice about situations in which marketers should consider using free gift promotions rather than price discounts.

In the final presentation, Raghubir reports a series of studies investigating the impact that offering a product as a free gift has on perceptions of the quality of the free gift itself. Her studies suggest that the use of a product as a free gift may undermine perceptions of its quality, especially when the price of the product is not mentioned in the ad, the product is not a well-known brand, or when the visual salience of the free gift is particularly high. Additional findings suggest that the value of the del is undermined when the above factors cause consumers to doubt the quality of the free gift. One important conclusion is that marketers should carefully choose the manner in which they offer free gifts if they hope to increase the perceived value of the offer, as well as to avoid damaging the image of the product offered as a gift.

In addition to the three research presentations, our discussion leader Gilles Laurent provides his views on the papers, as well as the general topic of alternative promotional strategies. This discussion will focus partly on the importance of understanding the complexity of the effects that sales promotion can have on consumer perception and behavior. Especially in terms of appreciating that promotional activities often have a number of unintended effects on consumer perceptions, which may or may not be beneficial to the marketer. Furthermore, these effects concern a broad range of consumer responses to promotion, including purchase and consumption rates, perceptions of quality for the promoted item, and overall perceptions of the value of the deal. Greater appreciation of these effects is necessary if marketers are to make effective use of the range of promotional techniques available to them.

 

"THE ATTENTIONAL EFFECTS OF SALES PROMOTIONS AT THE POINT OF PURCHASE AND AT THE POINT OF CONSUMPTION"

Pierre Chandon, INSEAD, France

Why do consumers respond more to sales promotions than to equivalent price reductions? Most prior research has addressed this issue by examining the symbolic and emotional consumer benefits of sales promotions (e.g., Darke and Freedman 1995; Lichtenstein et al. 1990; Strahilevitz and Myers 1998). In prior research (Chandon et al. 2000), we argued that sales promotions provide at least another nonmonetary but utilitarian benefit, reduced search costs, by raising the visual salience of products. Sales promotions increase visual salience either through distinctive and temporary packaging or through special signalling. This higher visual salience increases the chances that the product will be seen, a necessary condition for further consideration and choice. So far, the attentional effects of sales promotions have been studied using field experiments (e.g.Inman et al. 1990; Woodside and Waddle1975). In this research, we use process-tracing data and lab experiments to examine how promotion-driven visual salience influences visual attention and brand consideration. We study the attentional effects of sales promotions not only at the point of purchase but also at the point of consumption. Finally, we study how these effects differ for new vs. established brands and for ready to consume vs. inconvenient to consume products.

In the first study, we examine the effects of shelf talkers on visual attention, brand consideration, and long-term memory at the point of purchase. Shelf talkers are simply shelf tags that display the name of a product in a prominent way. With the collaboration of Perception Research Inc, we ask 300 adult shoppers to look at a picture of a supermarket shelf and to tell which brands they would consider buying while their eye movements are being tracked. We use a 4 (no promotion, shelf talker on new brand, shelf talker on established brand, shelf talker on new and 3 other brands) between-subject design. Prices are provided for each product and remain constant across conditions. We find that adding a shelf talker reproducing the brand’s logo increases the amount (number of looks), speed (time until the first eye fixation), and intensity (gaze duration) of attention for new brands but not for established brands. As a result, we find that shelf talkers only increase brand consideration and long-term memory for new brands. We also find that the effects decrease with the number of shelf talkers available on the shelf, and that adding a shelf talker decreases the overall amount of consumer search.

In the second study, we examine whether these results also hold at the point of consumption, and may thus explain why promotional stockpiling accelerates post-purchase consumption rates (Ailawadi and Neslin 1998). We ask 102 undergraduate students to choose what they want to consume by looking at a picture representing a pantry with eight different snack food products located on two shelves. Each product is assigned to one of four conditions according to a 2 (promotional stockpiling: 4 vs. 16 units) by 2 (salience: control vs. high) between-subject design with eight within-subject replications. To manipulate product salience, we place the brands in the "-high" salience condition on the top shelf and spread them out on the shelf whereas the brands in the control salience condition are placed on the lower shelf and stacked on top of each other. We find that, in the control salience condition, promotional stockpiling increases product salience and consumption likelihood. On the other hand, promotional stockpiling has no effect when the salience of the product is fixed and at a high level. Further mediation analyses show that, as expected, the effect of promotional stockpiling on consumption incidence are partially mediated by the higher salience of promoted product.

In the third study, we examine the effects of salience on consumption intentions and on brand search for convenient to consume products and for products that require preparation before being consumed. We use a 2 (high and low consumption convenience) by 2 (high and low salience) between subject design with two within-subject replications consisting of two different products (a food and a beverage) in the same experimental condition. We ask 75 undergraduate students to choose something to eat and to drink from the products available in a schematic representation of a pantry and a refrigerator. We then collect brand recall and consideration information. We manipulate consumption convenience by using pudding or ice-tea mix either in dehydrated mix formula, or in refrigerated ready to consume formula. We manipulate product salience by placing the target drink and food either on the middle of the fridge or pantry with black font on a light-gray background, or by placing them at the bottom with black font on a dark-gray background. As expected, we find a significant interaction between convenience and salience: raising salience increases consideration when the product is convenient to consume, but not when the product is less convenient to consume. The memory data suggests that these results are caused by lower search and consideration in the convenient to consume condition. In fact, we find that salience increases recall for the target product and decreases the size of the attention and consideration sets only when the salient product is convenient to consume. When the target product is not convenient to consume, consumers continue to search and to add brands in the consideration set after seeing the salient low convenience productCmost likely because they are looking for a more convenient alternative.

Overall, these results show that marketers can design more effective and cheaper sales promotions by emphasizing their attentional impact, both at the point of purchase, and at the point of consumption. Such attention-getting promotions would be particularly effective when the product is unfamiliar and convenient to consume.

 

"EFFECTS OF PRICING AND PROMOTION ON PERCEPTIONS OF PRODUCT QUALITY: IT DEPENDS ON HOW YOU FRAME IT"

Peter R. Darke, University of British Columbia, Canada

Cindy M.Y. Chung, Nanyang Technological University, Singapore

Sales promotion attempts to stimulate purchase behavior by increasing the perceived value of the offer in the consumer’s eyes. While price discounts have become the most dominant form of sales promotion, their use has also come under increased scrutiny. One of the main concerns is that discounts may lead to negative perceptions of product quality, which undermines the perceived value of the offer. While common wisdom suggests EDLPs may enjoy some advantage over discounts in this respect, the research described here shows that both strategies are vulnerable to negative quality inferences (Studies 1 and ). In contrast, free gift offers were better able to maintain quality perceptions than discounts, and were ultimately more effective in communicating deal value to consumers (Study 3).

The notion of attribute framing (Levin et al., 1998) was used as the basis of our predictions. This occurs when superficial variations in the description of a single product feature leads consumers to make positive or negative inferences about the product as a whole. In the present context, the idea was that consumers would use the prices suggested by different promotional offers to infer product quality. To the extent that the prices included in the offer are lower, perceptions of quality should also be lower (Rao and Monroe 1989). EDLPs and discounts both frame price decreases in terms of a lower selling price, which means consumers are likely to infer the quality of the product is also lower. In contrast, when an offer is framed as a free gift, only the higher original price is readily available to consumers. In this case, framing suggests that consumers are likely to base their quality inferences on the initial price of the item, rather than accounting for the value of the free gift by subtracting it from the original price. The implication is that an offer objectively worth $20 should have more positive effects on perceptions of quality and deal value when it is made in the form of a free gift, than when framed as an EDLP, or a discount.

STUDY 1

EXPERIMENTAL CONDITIONS

In Study 1, subjects were randomly assigned to the conditions in a 3(Offer-Type: Control, EDLP, Discount) x 3(Selling-Price: $59.99, $39.99, $19.99) between subject factorial design. An index of perceived quality served as the main dependent measure. Each participant examined an advertisement for a pair of headphones, which included pricing information, as well as a picture of the headphones, and a brief description of the item. The specific format for the pricing information was manipulated according to the design of the study (see Study 1). Subjects were asked to rate the ad on a number of dimensions. Ratings of the product’s quality served as the main dependent measure.

The results showed that a lower selling price led to lower perceptions of quality [F (2,163)=5.92, p<.01], regardless of whether the offer was made as a discount or an EDLP [p’s>.25 for offer-type main effect and interaction]. This suggested it is relatively difficult to attenuate negative price-quality effects using discount and EDLP claims. In addition, a second study further confirmed that discounts and EDLPs were highly vulnerable to negative quality inferences.

The final study examined whether free gift frames could better maintain perceptions of quality. Framing the value of an offer as a free gift (price $59.99, plus a free gift worth $20) should provide a higher price standard for quality inferences than framing the offer as a monetary savings ($20 off the initial price). Framing suggests that consumers offered a free gift are more likely to view quality in terms of the full price, rather than correcting for the value of the free gift. To test this idea, subjects were randomly assigned to one of the following conditions: high price ($59.99) and moderate price ($39.99) controls, a standard discount offer (Was $59.99, Now $39.99), and a free-gift offer (Price $59.99, plus free $20 gift). A repeated measure of product quality served as the main dependent variable. Product ads were presented to subjects online using a computer simulation of an internet shopping environment. In the free gift condition, the ad stated that the price of the headphones was $59.99, and included a free $20 CD of their choice. Pricing information in the control and discount conditions were varied as in studies 1 and 2. Subjects completed an initial set of quality ratings immediately after seeing the ad. They were then asked to directly examine a pair of the headphones, listen to a musical tape recording for 30 seconds, and rate the quality of the headphones again for a second time. Additional items examining the perceived value of the deal were also included.

The results suggested that the free gift offer maintained quality perceptions at a higher level compared to a discount of similar value [p<.05]. Furthermore, the initial quality differences produced by the free gift frame became further exaggerated following product trial [F (3, 81)=3.25, p<.05 for condition x repeated-measure interaction]. The free gift offer also significantly increased the value of the deal, while the discount frame did not. These findings confirmed the prediction that framing an offer as a separate free gift should be particularly good at communicating its value to consumers, while discounts were less effective in this respect.

The current findings suggest that free gift promotions provide some important advantages over discounts and EDLPs of similar objective value. These advantages should primarily exist in situations where consumers believe price is a good indication of product quality. The existing literature suggests this is most likely when: the brand name or the seller are not well-known, purchase frequency and product knowledge are low, consumers believe strongly in the price-quality rule, risk is high, and intrinsic quality cues are ambiguous or unavailable. Interestingly, it is relatively common for marketers to offer discounts to consumers under many of these conditions. For instance, when discounts or coupons are offered for generic products, or for new products or services, or when discounts are offered at new stores in order to encourage initial patronage. In such cases, the current findings suggest it would be preferable to use free gift offers instead.

 

"FREE GIFT WITH PURCHASE: PROMOTING OR DISCOUNTING THE BRAND?"

Priya Raghubir, University of California, Berkeley, USA

"Free gift with purchase" offers appear to be inundating the marketplace. The offers vary: some belong to the same product category whereas others do not. Some gift offers are evidently a lower value than the product they accompany, whereas others are advertised as being of higher value. Some free gifts are products made by the same manufacturer albeit offered as trail sizes or regular sizes, whereas others are not. The offers also vary in the manner in which they are communicated: whether they mention price or not. Some appear to be products in their own right, others have more of the appearance of being freebies, while yet others resemble product sampling transactions. While research in price promotions is useful to understand how such offers affect current and future sales of the promoted brand offering the free gift, an unanswered question is how they affect future sales of the brand being offered as a free gift.

This paper examines how consumers process a "free gift with purchase" promotional offer. The focus of attention is implications for the product offered as a free gift, rather than the product offering the promotion. Seven experiments systematically examine the process by which free gift promotions serve as a source of (favorable or unfavorable) information about the underlying value of the free gift. Two competing hypotheses are tested. The Value Discounting Hypothesis, based on information inferencing, argues that by virtue of being offered as a free gift, products will be valued less as evinced by lower purchase intentions and a lower price that consumers are willing to pay for them. The Quality Signalling Hypothesis, based on economic signalling, argues the reverse: consumers believe that the free gift is being given because manufacturers are confident of its quality and wish to induce subsidized trial to encourage later repurchase at full price. Conditions that foster one or the other effect (including strength of the effect) are developed. These include the (i) Presence of Alternate Information to make judgments about the value of the gift. Studies 1-4 examine the moderating role of severity of purchase preconditions, and the cost of the brand offering the gift, both affecting the short term profitability of an offer; (ii) Visual Salience of the gift. Studie 5 and 6 examine two contexts where the visual salience can "help" or "hurt" the free gift. (iii) Framing of the Deal. Study 7 examines the moderating role of semantics that frame the offer as a free gift or a joint bundle.

Results show that free gift with purchase promotions can lead to inferences about the value of the gift and the value of the promoted product. Thus, (i) consumers were found to discount the value of the gift unless the situation was one where the manufacturer could make up short term losses in the long term through repeat purchase at full price; (ii) consumers behaved as though they imputed gift value using purchase preconditions required to avail of the gift; leading to (iii) consumers attaching higher value to the same gift if it was given by a higher priced brand name; and analogously (iv) consumers being willing to pay higher prices for a product that offered a more valuable gift. However, interestingly, (v) offering a free gift did not always increase purchase intentions for the promoted product; and (vi) deal evaluations were a function of contextual cues, such as the inclusion of the value of the gift. Finally, we showed that contextual factors such as (v) the perceptual salience of the gift; and (vi) the frame of the deal, also affected the manner in which free gift promotions were processed by consumers.

REFERENCES

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Strahievitz, Michal and John G. Myers (1998), "Donations to Charity as Purchase Incentives: How Well They Work May Depend on What You Are Trying to Sell," Journal of Consumer Research, 24 (March), 434-46.

Woodside, Arch G. and Gerald L. Waddle (1975), "Sales Effects of In-Store Advertising," Journal of Advertising Research, 15(3), 29-34.

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